How to Claim Lifetime Education Credits
Lower your tax liability with a credit for courses that improve job skills. This guide explains the requirements for claiming this education benefit on a tax return.
The Lifetime Learning Credit (LLC) is a federal tax benefit for individuals paying for courses to acquire or improve job skills. This credit directly reduces the amount of tax owed for a wide range of postsecondary education. It supports undergraduate, graduate, or professional development courses and can be claimed for an unlimited number of years.
Determining Your Eligibility
To qualify for the Lifetime Learning Credit, a student must be enrolled at an eligible educational institution to obtain a degree or acquire job skills. Eligible institutions include most accredited colleges, universities, and vocational schools that can participate in federal student aid programs.
You must pay the qualified expenses for yourself, your spouse, or a dependent on your tax return; a student claimed as a dependent cannot claim the credit. Eligibility is also limited by your modified adjusted gross income (MAGI). For the 2024 tax year, the credit phases out for single filers with a MAGI between $80,000 and $90,000, and for joint filers with a MAGI between $160,000 and $180,000.
Your filing status also affects eligibility, as individuals using the married filing separately status cannot claim the LLC. Additionally, you cannot claim both the LLC and the American Opportunity Tax Credit (AOTC) for the same student in the same tax year. If you qualify for both, you must choose which one to claim.
Identifying Qualified Education Expenses
Qualified education expenses are limited to tuition and fees required for enrollment or attendance at an eligible educational institution. This includes mandatory costs, such as a required student activity fee. Any amount you must pay directly to the institution as a condition of enrollment can be included.
Many costs associated with higher education are excluded, even if they are necessary for attendance. These include:
- Room and board
- Transportation
- Insurance
- Medical costs
- Other personal living expenses
Books, supplies, and equipment also do not qualify unless the school requires you to purchase them directly from the institution as a condition of enrollment.
Educational institutions issue Form 1098-T, Tuition Statement, which reports payments received for tuition and related expenses. While this form is a key document, the amount in Box 1 may include non-qualified fees, so you must review your own records to ensure you only use costs that meet the IRS definition.
Calculating the Credit Amount
The credit is worth 20% of the first $10,000 in qualified expenses paid for all eligible students on your tax return. This means the maximum credit you can claim is $2,000 per return, not per student.
For example, if you paid $5,000 in tuition for one student and $3,000 for another on the same return, your total expenses would be $8,000, and your credit would be $1,600. If you paid $12,000 for one student, your credit would be based on only the first $10,000 of expenses, resulting in the maximum $2,000 credit.
The LLC is a nonrefundable credit, meaning it can lower your tax liability to zero, but you will not get any of it back as a refund if it exceeds your tax bill. The credit amount is also reduced if your MAGI falls within the phase-out range for your filing status.
How to Claim the Lifetime Learning Credit
To claim the credit, you must complete IRS Form 8863, Education Credits, and file it with your federal tax return. Since this form is used for two different credits, ensure you are completing the sections designated for the LLC.
You will begin by completing Part III of Form 8863. Here, you will enter the name and Social Security number of each student, along with their qualified expenses. The form guides you to total the expenses and calculate a tentative credit amount.
The form then directs you to a section for applying the limitation based on your modified adjusted gross income, which may reduce your credit. Once the final credit amount is calculated on Form 8863, you transfer that figure to Schedule 3 (Form 1040). This amount is then carried over to your main Form 1040 to reduce your tax liability.